Commercial Real Estate 2017-08-29T20:25:21+00:00

Commercial Real Estate

Commercial real estate is another indicator that gives into a regional economy’s health and activity. When the economy is in expansion and companies expect to do well, vacancy rates fall and rents rise. Conversely rents fall and vacancies increase when the economy is in a recession. Construction of commercial real estate can reflect that firms are planning for future growth. We were only able to obtain commercial real estate data for Stanislaus and San Joaquin Counties due to market size.

Data for this indicator was obtained from CoStar’s office market report for the Stockton and Modesto areas. Data is unavailable in Merced due to the size of the market.

This graph shows the percent of office buildings in the Stockton and Modesto markets that are vacant in the given quarter. Data for the Merced market was unavailable due to the small size of the Merced area. Vacancy rates in the Stockton and Modesto markets have fallen in each quarter since third quarter of 2013, reaching a vacancy rate of only 9.1% in the first quarter of 2016. This reflects the continued economic recovery in the commercial market.

Data for this indicator was obtained from CoStar’s office market report for the Stockton and Modesto areas. Data is unavailable in Merced due to the size of the market.

This graph shows the annual asking rental price per square foot for office buildings in the Stockton and Modesto markets. Data for the Merced market was unavailable due to the small size of the Merced area. Unlike vacancy rates, rental rates have not steadily increased since 2013, although the overall trend has been increasing. Rental rates have increased by 5.5% since the fourth quarter of 2012. Rental rates are much more sensitive to changes in market conditions and economic outlook. Owners and management companies are more likely to decrease rent instead of allow a property to become vacant which might explain the temporary decreases in rental price while vacancy rates have not increased since 2013.

Select office and industrial commercial real estate indicators

Office Buildings Q4-2015 Q1-2016
Vacancy Rate 10.7% 11.5%
Asking Lease Rate $15.24 $15.36
Net Absorption 46,512 -24,041
Industrial Buildings Q4-2015 Q1-2016
Vacancy Rate 8.0% 7.8%
Asking Lease Rate $4.68 $4.56
Net Absorption 552,349 1,533,195

This indicator was obtained from the office and industrial market reports published by Colliers International for the Stockton and Modesto areas. Data is unavailable in Merced due to the size of the market.

This table shows the percent of office and industrial buildings in the Stockton MSA that are vacant, the asking annual rental price per square foot for office and industrial buildings, and net absorption (the change in total available square footage) for office and industrial buildings. This data was obtained from Colliers International, while other data in this section is from CoStar Group. Colliers International does not have data for the Modesto or Merced MSAs due to their smaller size. While CoStar shows the vacancy rate for office buildings has been continually decreasing, Colliers shows the rate increased slightly in 2016 due to the negative net absorption rate in the first quarter of 2016. Both the vacancy rate, and asking rental price for industrial buildings have decreased in 2016. This could be due to owners of industrial properties decreasing the asking price to continue to attract tenants during a slight lull in market conditions. The net absorption rate of 1.5 million for industrial buildings is three times higher than the net absorption rate in the fourth quarter of 2015.

CoStar Retail Report

Retail Building Vacancy Rates

This graph shows the percent of retail buildings in the Stockton and Modesto markets that are vacant in the given quarter. Data for the Merced market was unavailable due to the small size of the Merced area. Vacancy rates for retail buildings in the Stockton and Modesto markets remained the most constant out of the three building types reported in this section, although vacancy rates have been decreasing since 2012. The total decrease in vacancy rates since the first quarter of 2012 has been 1.5 percentage points.

Retail Building Rental Rates

This graph shows the annual asking rental price per square foot for retail buildings in the Stockton and Modesto markets. Data for the Merced market was unavailable due to the small size of the Merced area. Unlike rental rates for office and industrial buildings, rental rates for retail buildings decreased between 2012 and 2015. When new residential developments are planned in cities, retail buildings are usually the type of commercial real estate built along with the residential units. The increase in the stock of retail buildings could be a contributing factor in the decrease in rental prices.